Employers in the On-Demand Economy: Why Treating Workers as Employees is Good for Business

More and more, America’s workers are seeing their jobs deliver less and less of what they need to get by. For many, the hope of attaining a good job with an adequate social safety net is giving way to the reality of piece-rate work in part-time, hours-long and be-your-own-boss short-term “gigs.” In the on-demand economy, online and app-based companies connect workers with short-term jobs that involve driving, cleaning, delivering food, doing odd jobs or performing tasks online, often for very little money, with no job security and no labor protections at all. The on-demand sector is a tiny part of the economy overall, but it has grown ten-fold in the last three years.i

Uber is the biggest and most influential of the on-demand businesses, capitalized at $62.5 billion. Initially, it set the standard for the industry by labeling its drivers “independent contractors”—essentially claiming that each of its some 160,000 drivers is in business for himself or herself—pushing many of the costs of doing business onto their shoulders and depriving them of baseline labor protections such as workers’ compensation, Social Security contributions, minimum wage and anti discrimination protections. This independent contractor designation can also rob governments of millions of dollars in unpaid taxes and insurance premiums, and undercuts competitors that don’t carve out their employees.

But as many companies in the on-demand economy are proving, it doesn’t have to be that way. Many companies that once might have aspired to emulate Uber and disavow their responsibilities to their workers are changing course. They’re finding that successful companies are built on fair treatment of workers, beginning with recognizing them for what they are: employees. Some, like the home care company Honor, the grocery delivery company Instacart and the package delivery startup Shyp, started out with an independent contractor model, and then switched. Others, like the shopping, laundry and cleaning service Hello Alfred, food service and delivery company Munchery, cleaning company Managed by Q, transit service Bridj and temp agency BlueCrew, treated their workers as employees from the start. Some of these companies are talking to the media and writing op-eds and giving interviews about the benefits of treating their workers as employees.

More and more, America’s workers are seeing their jobs deliver less and less of what they need to get by. For many, the hope of attaining a good job with an adequate social safety net is giving way to the reality of piece-rate work in part-time, hours-long and be-your-own-boss short-term “gigs.” In the on-demand economy, online and app-based companies connect workers with short-term jobs that involve driving, cleaning, delivering food, doing odd jobs or performing tasks online, often for very little money, with no job security and no labor protections at all. The on-demand sector is a tiny part of the economy overall, but it has grown ten-fold in the last three years.i

Uber is the biggest and most influential of the on-demand businesses, capitalized at $62.5 billion. Initially, it set the standard for the industry by labeling its drivers “independent contractors”—essentially claiming that each of its some 160,000 drivers is in business for himself or herself—pushing many of the costs of doing business onto their shoulders and depriving them of baseline labor protections such as workers’ compensation, Social Security contributions, minimum wage and anti discrimination protections. This independent contractor designation can also rob governments of millions of dollars in unpaid taxes and insurance premiums, and undercuts competitors that don’t carve out their employees.

But as many companies in the on-demand economy are proving, it doesn’t have to be that way. Many companies that once might have aspired to emulate Uber and disavow their responsibilities to their workers are changing course. They’re finding that successful companies are built on fair treatment of workers, beginning with recognizing them for what they are: employees. Some, like the home care company Honor, the grocery delivery company Instacart and the package delivery startup Shyp, started out with an independent contractor model, and then switched. Others, like the shopping, laundry and cleaning service Hello Alfred, food service and delivery company Munchery, cleaning company Managed by Q, transit service Bridj and temp agency BlueCrew, treated their workers as employees from the start. Some of these companies are talking to the media and writing op-eds and giving interviews about the benefits of treating their workers as employees.